April 14, 2021

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Inequality by Way of Government

3 min read

Often when I make the case for free-market capitalism, I’ll get a head nod or two and then the inevitable comeback: “Yeah, but inequality.”

Forget all the great things that capitalism has done, the smartphones we carry, the broadband we use to stream movies, the drugs and vaccines that extend lives. Forget those who hold back consumption to fund or invent stuff that brings the masses out of poverty. Because Jeff Bezos had the audacity to get rich for his efforts, he gets pushback. All that technology and red-meat capitalism comes at a great societal cost, critics say. People with smartphones are living below the poverty line. Capitalism is broken and needs to be reformed. We need a new, fairer system.

Oh, we’re getting one, good and hard. (See: stimulus, $1.9 trillion plus another $3 trillion coming up.) John Cochrane, an economist and senior fellow at Stanford’s Hoover Institution, tells me inequality is raised frequently as a nasty symptom of some alleged disease of capitalism. “Not so fast,” he warns. “Are capitalism and free markets the reasons for income inequality? Or are misguided government interventions to blame?” He quickly rattles off poor schools, occupational licensing, land-use rules, and disincentives to work as examples of things that keep people down—an “opportunity gap.” Let’s call them the Four Progressive Horsemen of Inequality.

Public schools are controlled by teachers unions. Covid proved that. Forget learning; they push students along to graduation rather than teach them the skills to capture life’s opportunities. We know public schools have failed because more than half of new students at community colleges require remedial courses in math, English or both. Then consider those who don’t attend college. American Federation of Teachers President Randi Weingarten collects Grade-A compensation—$500,000 a year—but has failed students. The average Chicago public-school teacher made $108,000 last year in salary and benefits. Illinois State Rep. Blaine Wilhour put it best: “The teachers union has become the biggest obstacle to upward mobility and to breaking the cycle of poverty for poor and minority students.”

Occupational licensing is a nice way to say job restriction. Around 1,100 occupations, involving close to a quarter of U.S. workers, require licenses. For doctors and lawyers this might make sense, but for many low-skilled jobs, it’s a huge barrier and a root of inequality. Hair braiding in Mississippi used to require 300 hours of training and a license in “wigology” until workers fought back. It’s now a $25 fee. Needing a license to be a pedicurist, a home inspector, a security-alarm technician, a pipe-fitter and so on is putting entry-level opportunities out of reach. California’s A.B.5 foolishly restricted freelancers, the so-called gig economy. In Washington, D.C., the House just passed the pro-union PRO Act to repeat this mistake at the national level. Can’t they see this perpetuates inequality?

2021-03-28 12:51:00

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